Global Logistics and Supply Chain Strategies - June 2008 - (Page 8) Team Approach Needed to Counter Growing Risks to Supply Chain Editorial Director Jean V. Murphy A conversation with Beth Enslow, senior vice president of the Supply Chain Risk Management Practice at Marsh, a global leader in risk management and insurance brokerage based in New York. Marsh’s Supply Chain Risk Management Practice recently conducted a survey of 110 risk management professionals to assess risks related to the supply chain and best practices in managing those risks. Beth Enslow, who has more than 20 years’ experience researching and advising companies on physical and financial supply chain optimization and related risks, authored the resulting report, Stemming the Rising Tide of Supply Chain Risks, which is available for download at http://global.marsh.com/risk/supply_chain/register.php. Enslow sat down with us to discuss the survey’s findings. plier because it looks good on paper, but perhaps that supplier doesn’t have good quality processes in place or maybe its factory is sitting in an earthquake zone or logistics and transportation services from that supplier turn out not to be reliable. Those problems can run downhill through the rest of the organization and have a significant strategic impact. So companies need to be proactive in managing these risks versus just reacting to things that go wrong. The way to do this is to have a cross-functional team that includes both supply chain and risk managers, which is what we are seeing the best companies start to do now. Q: Before we get into the survey results, can you help us understand how supply chain professionals and risk management professionals typically relate to one another within the enterprise? Enslow: Traditionally, risk management professionals have dealt in a very quantitative way with risk inside the four walls of a company, which includes issues like workers’ compensation or property insurance to protect you in case there is a fire in your plant or a plant is struck by a tornado – things like that. Mostly, they have reported up through Finance to the CFO or Treasurer and they haven’t really had much interaction with supply chain operations and functions. Supply chain professionals have basically managed risk and disruptions in the supply chain sort of on the fly, perhaps having a contingency plan in the back of their minds in case something goes wrong. Historically, there has been no merger between the strategic view of enterprise risk and the functional activities of the supply chain. Supply chain risk really was not thought of from an enterprise viewpoint. As our study shows, however, a variety of drivers are causing companies to realize that supply chain risks are increasing and can have a domino effect. Procurement may make a decision on a sup8 JUNE 2008 Q: What are some of the causes for increased supply chain risks? Enslow: The growth that companies see in supply chain risk was one of the big “ah-ha's” of this study. Close to three out of four companies that we surveyed say their supply chain risk levels have increased since 2005. So we have to ask why this is the case. We believe there are two clear reasons. One is the continued leaning out of supply chains. With lean manufacturing and inventory processes and justin-time initiatives, we have taken a lot of the traditional shock absorbers to risk out of the supply chain. Two, we have, at the same time, become more global from a manufacturing and sourcing perspective, which means we have more hand-offs between partners and more opportunities for things to go wrong because the supply chain is so much longer. These are the two issues that are causing this dramatic growth in supply chain risk. As risks increase, executives are paying more attention. The CEO, the CFO and boards of directors are seeing that supply chain risk is no longer just about whether you are able to deliver to the customer on time. It becomes an issue of corporate brand and reputation and even an issue of earnings and stock price. So they are now actually going to http://global.marsh.com/risk/supply_chain/register.php http://global.marsh.com/risk/supply_chain/register.php
For optimal viewing of this digital publication, please enable JavaScript and then refresh the page. If you would like to try to load the digital publication without using Flash Player detection, please click here.